By Richard Lapper in Johannesburg
Published: October 19 2009 20:08 | Last updated: October 19 2009 20:08
Links: Jacob Zuma of South Africa and Hu Jintao of China have met several times
When European steelmakers began to reduce their orders towards the end of last year, many of the 4,300 workers at the Sishen iron ore mine in South Africa’s Northern Cape province were understandably nervous for their jobs. Ten months on though those anxieties are a distant memory.
A 35 per cent increase in demand from China’s growing industry has compensated for the 50 per cent decline from recession-hit Europe, Japan and South Korea. Executives at Kumba, the Anglo-American subsidiary that runs the facility, are pressing ahead with expansion plans.
For Eddie Majadibodu, a trade unionist who negotiates for the miners, it makes a refreshing contrast from the gloom in sectors such as platinum, where thousands of jobs have been lost.
“There were concerns but the company is doing well,” he said.
Kumba is not the only company to benefit from South Africa’s rapidly growing connection with China. In the first half of this year, while exports to Germany, the UK, Japan and the US plummeted, China kept growing and sucked in increasing amounts of South African iron ore, chrome and other raw materials.
In the latest sign of China’s intensifying relationship with Africa, the fifth-largest export market for South Africa a year ago is now the most important destination for the country’s goods.
China’s emergence as South Africa’s number one export market coincides with signs of growing Chinese investment interest. It seems to be pushing into the background previous concerns in South Africa that China’s industrial strength and buoyant electronic and textiles exports could swamp domestic industry.
With connections to countries such as Brazil and India also becoming stronger, for the first time since the governing African National Congress came to office in 1994, at the end of white rule, the former liberation movement’s interest in promoting a so-called southern axis linking the big emerging nations and Africa shows signs of being matched by economic realities.
Although a large chunk of the estimated $7bn that China has invested in South Africa so far is accounted for by the landmark purchase by the Commercial and Industrial Bank of China of a 20 per cent stake in South Africa’s Standard Bank two years ago, there are other signs of increased interest.
Bankers report that Chinese investors might buy stakes in local miners, especially those poorly capitalised junior companies which have been weakened by last year’s slump.
“There is lots of sniffing around. We are getting one or two people through our doors every week,” said one investment banker in Johannesburg.
More broadly, South Africa’s communications and transport infrastructure makes it an attractive location for Chinese companies operating elsewhere in the region.
One big Chinese trading company recently set up a Cape Town subsidiary to service a multimillion dollar housing investment project in Angola.
Observers still believe that the connection will develop relatively slowly. Bankers hint at logistics problems, arguing that companies sometimes have difficulty in getting funds out of China.
China’s drive has already hit political and cultural resistance and there is always a chance this may manifest itself again.
Only three years ago Thabo Mbeki, then the president, warned of the risks of a new colonial relationship, prompting the government to impose temporary quotas on Chinese textile imports in 2007 and 2008.
“They are not always welcomed with open arms,” added the banker.
In the short-term China’s dominant trade position might weaken as Europe recovers. Executives at Kumba, for example, expect sales to China to decline as a proportion of their total next year.
Equally though, there are indications that although cyclical factors are responsible for this year’s acceleration, China’s ties with South Africa can only grow stronger in the longer term.
Source : http://www.ft.com/cms/s/0/2c126ef0-bcde-11de-a7ec-00144feab49a.html
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